We learn all this from the Wal-Mart Effect, written by Charles Fishman late last year before Wal-Mart Prez Lee Scott's latest pronouncements that we have been so happy to promote at TreeHugger here and in John's post today. The book tries to study the very opaque, inaccessible largest company in the world to see how it works, how it affects us whether we shop there or not, and how it is changing the economy of America and its suppliers all over the world. Although the book does not address the new initiatives that are receiving so much copy, it does lay out good reasons for us to question Wal-Mart's ability to carry through with them.In looking for an example of the Wal-Mart Effect, we will concentrate on one product: salmon. What follows is a summary of the chapter.
12 years ago there was no Atlantic salmon in Chile- logically since it's on the Pacific. It is not found south of the equator and it would be like "finding penguins in the Rockies." The Norwegians figured out how to farm them in the sixties, how to ship them in the eighties, and the Canadians and the Chileans copied it in the nineties.
In Chile, it revolutionized life in the south. Subsidence farmers became fish plant factory workers, Salmon became the second biggest export after copper, $1.5 billion in sales last year. In America, it changed our diet; salmon is now as common a meal as chicken or pork- consumption went from half a million pounds 15 years ago to over three times that now. The Chilean economy has changed because of it; our eating habits have changed because of it, and half of it is sold at Wal-Mart.
It is taken from the pens early in the morning and taken to the plant for filleting. It is then trucked to Santiago and put on a plane to Miami. In the major centers it is being sold within 48 hours of being taken out of the water; a day later it is in every Wal-Mart in America.
Wal-Mart has made $4.84/lb salmon accessible to everyone in America because Wal-Mart has one goal- to deliver Always Low Prices, Always. The culture is based on Sam Walton's experiment 40 years ago to see what happens if you cut costs and cut prices to the bare margins of survival- the company is based on the solid country virtues of frugality, modesty and unpretentiousness. It delivers exactly what it promises. It does not come into a community and drive the competition out of business by predatory pricing that then goes up again when the competition is gone- it stays cheap. It is not evil, it is single-minded.
This is the root of Lee Scott's problem in delivering on his promises. Long ago Wal-Mart reduced packaging to reduce cost. They developed pallet sized sales units in aisles to reduce space required and further reduce handling. Getting better trucks that use less fuel makes sense, so does building greener stores that reduce operating costs — that all fits within the Wal-Mart philosophy. It is efficient and frugal- Sam would have done that.
But when it comes to eliminating cheap salmon, paying decent wages and not beating the last cent out of suppliers, and not shifting manufacture offshore to the cheapest supplier, this cuts to the core of Wal-Mart- if it is not cheaper than the competition people will not shop there. The goal is still to deliver Always Low Prices, Always. Otherwise why bother?
Lee Scott is saying all the right things, but the stock is in the tank. Treehugger and Fortune may love him, but shoppers will want to know- "Where is the $ 4.84 salmon?"
There is a lot to learn in the Wal-Mart effect, it is well-written and could easily get bogged down in endless statistics, but rarely does. One just has no idea how big Wal-Mart is and how important it is to our economy, and how the Wal-Mart effect is misunderstood and under-rated. I was not fond of the last weepy chapter composed of interviews of people laid off in a sprinkler factory, (and who still shop at Wal-Mart because it is cheap) but the rest of the book was fascinating. We came away with the conclusion that Lee Scott and Wal-Mart have their hearts in the right place, but all of the green pronouncements in the world do not speak to their core customer, who is after always low prices, always.